EPCG scheme made flexible

FOREIGN TRADE POLICY

The Export Promotion Capital Goods Scheme, which allows import of capital goods at a concessional Customs duty of 5 per cent, has been made more flexible. The export obligation period has been extended to a maximum of 12 years.

"We have introduced certain flexibilities in the conditions relating to maintenance of average export performance under the scheme," Commerce and Industry Minister Kamal Nath said.

Officials said the changes would help genuine exporters who were unable to fulfil the export obligation due to changed market conditions.

Exporters, however, pointed out that the norms have in fact been tightened as last year's supplement allowed export obligation to be fulfilled over a maximum of 13 years.

"The relaxation in the export obligation period announced last year could not be implemented on account of objections raised by the revenue department. This year, we have been told that the new norms, though tighter, are likely to be implemented," a FIEO functionary said.

Under the scheme, the export obligation period is equal to eight times the duty saved on capital goods imported, to be fulfilled over a period of eight years from the date of issuance of the authorisation.

As per the revised structure, a two-year extension in export obligation would be possible on payment of a composition fee of two per cent of the total duty saved or an enhancement in export obligation to the extent of 10 per cent of the total obligation, for each year of the extension.

A further extension of two years would be considered on the condition that 50 per cent of the duty payable in proportion to the unfulfilled export obligation is paid.

In case a firm is still not able to complete the export obligation, the duty already deposited, plus interest, would be deducted from the total duty.

The norms for clubbing of EPCG authorisations have also been made more stringent by re-inclusion of a condition that the EPCG authorisation should be issued during the same licensing year and for the export of the same product or services. The condition that such authorisation should be under the same Customs notification has been retained.

The provisions for export-oriented units have also been tightened. The policy clarifies that supplies to domestic units, if paid for under the Export Earnings Foreign Currency account, will not be counted towards fulfillment of the export obligation.